How to Use an iPhone 4/4S on a Prepaid Plan with No Contract

This post is about a recent discovery that may be of use to some of my blog readers. If you are located in Europe, this post will not apply to your situation because you will have a free choice of mobile networks to use your iPhone on. However, if you are located in the U.S., you might find this article relevant and useful – so please read on…

About a week ago — right after Apple announced its new iPhone 4S, I started thinking that it might be time for me to replace my aging (although still very useful) Nokia N900. I am not an Apple fanboy and had been resisting for years the notion of buying an iPhone, simply because I thought that would “commoditize” me in the “ocean” of iPhone users surrounding me both in Washington, DC and London. However, I already own an iPad. And I feel that adding an iPhone would make it easier to share apps across platforms, rather than having to deal with yet another ecosystem of apps. Besides I do not want to have to figure out how to create a working interface between an Android device and my Mac Mini, Windows 7 laptop, Unix-based network hard disk, and Apple Airport-enabled multifunctional printer/scanner at home. In other words… I’ve become lazier, more complacent… and ready to take the plunge and go for the iPhone…

There was one big problem, however. For a long time, I’ve avoided getting tied into rigid and constraining long-term contracts with mobile phone companies. And I did not want to get hooked on shelling out $100+ to AT&T on a monthly basis for the next 24 months.

So I started looking for a solution. And as a good old friend of mine used to say, “When there is a will, there is a way.” I discovered a prepaid mobile plan that not only allows you to use your iPhone with 3G connectivity, but would even accept an AT&T-locked phone. And all that for a fraction of the monthly price I would have to pay AT&T. And completely legitimately.

So I could not help but share this discovery with you. So here goes…

The Mobile Network

Back in the late 1990s, a new phenomenon picked up in the innovative countries of Scandinavia – a prepaid mobile service that was offered by virtual carriers who leased minutes in huge quantities from incumbent mobile providers, at wholesale prices, and then offered customized plans to specific demographic segments in their respective markets. Those virtual carriers were dubbed mobile virtual network operators (MVNOs). MVNOs gained speed quickly across Western Europe but started becoming popular in the U.S. in the past few years. Perhaps most of you will recognize the brands of Cricket Communications or Boost Mobile.

Armed with that knowledge, I started looking for MVNOs that lease wholesale bandwidth from AT&T’s network. And I found… H2O Wireless, or more specifically a web site targeting the DC area, called DCH2O. The web site advertises a number of prepaid options, the most attractive of which gives you unlimited calling, texting and 3G/4G data connectivity for $60/month. To sweeten the deal, the option also includes $20 worth of free international calling (enough to talk to the UK for 1,538 minutes). All you need to do is buy a mini-SIM card, which is compatible with iPhone 4/4S, for $12.99, and then just buy recharge vouchers for $60 each month you want to use your iPhone. You can even port your number to the new service.

The Phone

There are a number of options. You can buy a used iPhone 4 on eBay for $350 or less. You can buy a new iPhone 4 on eBay for $450-500. Or you can pre-order an unlocked iPhone 4S, which according to some rumors will be available in Apple stores for $649 starting in November (click here or here for details). (All prices quoted are for the basic 16 GB phone, and may change after this post has been published.) Or if you are truly jet-set and don’t want to wait until November, you can get your unlocked iPhone 4S starting from October 14 at any UK Apple store for £499. So, the choice is truly yours!

Is This Worth It?

Let’s do some simple math.

An iPhone 4S through an AT&T contract will cost you $199 upfront and at least $100 per month in plan fees for the next 24 months. I am pretty certain the plan will go well over $100, but let’s keep things simple and assume it is $100.

If you opt to buy the unlocked 4S from an U.S. Apple store in November, you’ll pay $649 upfront, and dish out $13 for the mini-SIM, and then shell out $60 per month for the H2O service. This means you’ll need 11 months and 18 days to break even. On the 19th day of your 11th month of service, you’ll be saving money by using the option I’m describing in this blog.

Things get even better if you decide to go for the iPhone 4. Assume you have to pay AT&T $99 upfront for the 8 GB version and then again upwards of $100 per month for 24 months of contract. If you buy a new phone on eBay for roughly $500, get the mini-SIM card from H2O and then pay $60 per month, you’ll break even after 10 months and 11 days of usage. And, of course, you’ll be getting a 16 GB phone versus AT&T’s 8 GB phone.

You can save even more if you’re willing to settle for an used phone in a nice condition, which you can find on eBay for $350 or less. Then you’ll have to wait no longer than 6 months and 18 days to start saving money.

In all these calculations, I am not even factoring in the $20 of international calling credit that you’ll be getting with the prepaid option. International calling credit may be of great value to someone like me who has lots of friends and family members abroad, but may not be of too much use for people that are 100% based in the States. So I decided to leave it out of the calculations. But you can see the substantial savings even without it, I hope.

Does This Work?

Thus, we come to the most important question – “Does this work?” I have to admit that I have not tried it yet. I am still thinking whether I really need a new phone and if I do, whether I should go with the iPhone 4S, a new iPhone 4, or a used one.

But I’ve done some research online, and it seems to be working. I’ve embedded below two video demonstrations (just keep in mind that those demos were shot by users in late 2010 and early 2011, and H2O did not feature unlimited data at that time, but it does now).

The guys from SlashGear also blogged about using iPhone or Android phones on H2O in August this year. They confirm that you can use data services on the H2O virtual network.

Important Disclaimer

I hope you found this post informative and useful. I want to make clear one important thing before I finish this post. I am in no way related to H2O and am not profiting from advertising this company’s services. Similarly, I am not related to AT&T, Apple and eBay. The reason I write this post is because I know there are other people like me who are looking for a cheaper and more flexible alternative to using an iPhone in the U.S.

When and if I move to H2O, I’ll be sure to post an update and let you know my experiences. In the meantime, if you have already used H2O with an iPhone, please drop a line or two here to let us know how you feel about the service.

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3 Responses to How to Use an iPhone 4/4S on a Prepaid Plan with No Contract

  1. Boyan says:

    Great Post – I totally agree with you for doing the math before locking yourself in a long term contract. I am happy with my T-Mobile plan with unlimited data (if there is such thing it should be could reasonably unlimited 🙂 or something of the sort) when I compare it to AT&T and Verizon (not having a sim card is not an option for a person going often to Europe). Doing the math, it makes sense to purchase the unlocked Iphone from the apple store, and then balance the expense with the monthly plan. I am pretty satisfied with my Blackberry Bold 9900 purchase (luckily no issues for 4G users despite the global failure of RIM), but when IPhone 5 comes into the market I will buy it. Hopefully, I will continue to have the reasonable plan with T-Mobile after the merger is approved…

  2. postal rates says:

    why is VLC in Windows such a nightmare to get Chinese subtitles working, yet Movist on Mac does it without any problem

    • Emil_M says:

      Thanks for your comment. Not sure how VLC handles Chinese subtitles (never tried to run subs in Mandarin or Cantonese). But one thing I know for a fact is that making subtitles work can sometimes be a total nightmare – under both Windows and Mac OS experiences. I still haven’t figured out how Quicktime and VLC randomly elect to play subtitles in one instance, but then vigorously reject to recognize the SRT file in another instance. Good luck with the Chinese subtitles!

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